International Expansion. Diversification. Growth. Interim Report

Transcription

1 International Expansion. Diversification. Growth. Interim Report 30 June 2015

2 Welcome to our Interim Report 2015 HIGHLIGHTS Continued delivery of strategy - good financial performance driven by contribution from Russell as well as from underlying growth in Capital Markets, Information Services, OTC clearing at LCH.Clearnet and Italian Post Trade operations Revenue 1 up 90% to 1,164.9 million (H1 2014: million); on a continuing operations basis 2, revenue up 9% and up 14% after adjusting for the loss of LME business Total income 1 up 83% to 1,208.7 million (H1 2014: million) Operating expenses of million, up 4% on an organic and constant currency basis as the Group invests in growth initiatives, and flat after excluding cost of sales Adjusted operating profit 3 up 27% at million (H1 2014: million); operating profit of million (H1 2014: million); profit after tax of million (H million) Adjusted EPS 1,3 up 14% at 65.5 pence (H1 2014: 57.3 pence); basic EPS 1 of 43.4 pence (H1 2014: 40.5 pence) Interim dividend increased 11% to 10.8 pence per share (6 months to 30 September 2014: 9.7 pence per share), reflecting good performance and confidence in future prospects as investment for growth continues Good progress with integration and development of global indexes business, FTSE Russell, and with the sale of Russell Investment Management Open access is delivering - agreement with CME to launch US futures contracts on FTSE Russell indexes; Turquoise entered exclusive discussions with Plato Partnership, to collaborate on market structure initiatives in Europe CONTENTS Chief Executive s Statement... 1 Operating performance... 7 Consolidated income statement Consolidated statement of comprehensive income Consolidated balance sheet Consolidated cash flow statement Consolidated statement of changes in equity Notes to the financial information Principal risks Going concern/directors Statement of Directors responsibilities Independent review report to London Stock Exchange Group plc Financial calendar / Investor relations contacts Unless otherwise stated, all figures below refer to the six months ended 30 June Comparative figures are for the six months ended 30 June 2014 (H1 2014). 1 revenue, total income and EPS include both continuing and discontinuing operations 2 continuing operations exclude businesses marked for sale, primarily being Russell Investment Management 3 before amortisation of purchased intangibles and non-recurring items Organic growth is calculated in respect of businesses owned for at least 6 months in either period and so excludes Bonds.com, MTS Indices and Frank Russell Company. The Group s principal foreign exchange exposure arises from translating our European based euro and US based USD reporting businesses into sterling.

3 CHIEF EXECUTIVE S STATEMENT As a leading international, open access market infrastructure business we continue to see attractive opportunities for growth in a changing regulatory and competitive landscape. Overview We have made good progress as we continue our strategy to develop as an increasingly international, open access market infrastructure and capital markets business. Despite currency headwinds our continuing operations, including Russell Indexes, delivered a 9% increase in revenue. Our diversified global Group is achieving integration benefits, investing to support further organic growth and remains well placed to benefit from structural and regulatory-driven market opportunities. The Group s good overall performance reflects underlying growth in Capital Markets, Information Services and our Italian Post Trade businesses, plus the contribution from Russell Indexes and the Investment Management operations. OTC clearing at LCH.Clearnet has also continued to make solid progress. With our continued focus on operational leverage, costs were well controlled during a period of increased expenditure as the Group invests in a range of growth initiatives, and the integration of FTSE and Russell is well underway. Reflecting our good performance and confidence in future prospects, we have increased the interim dividend by 11%. Some of the key developments over the period are detailed below. In May, we provided an update on our Post Trade operations, highlighting both cost reduction and revenue opportunities. In summary, we outlined the next phase of cost savings at LCH.Clearnet, amounting to another 40 million in addition to the 60 million already achieved over the past two years. Further efficiencies are also achievable in the longer term as LCH.Clearnet commences work to replace legacy systems. Incremental revenue opportunities of million by the end of 2018 were also identified, across LCH.Clearnet and the Group s settlement and custody operations, globesettle and Monte Titoli. Work is progressing well to achieve these targets. Developments in other parts of the Group have been announced during the period. FTSE started the transition to include China A shares in its global benchmarks, with the launch of transitional indexes for Emerging Markets. The Group signed an MOU with Haitong Securities to collaborate on trading, ETFs and IPOs, to help facilitate Chinese investor access into London. Regulatory approval for Hong Kong firms to become members of London Stock Exchange has been received and in July, BOCI Securities, a wholly owned subsidiary of Bank of China, became the first member of London Stock Exchange from Hong Kong. In addition, the Group entered a partnership agreement with Borsa Istanbul, to develop trading in Turkish index and equity derivatives, as well as launching an index partnership with FTSE. 1 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

4 In Primary Markets, activity levels remained strong, with record fund listings from a diverse range of international issuers, launch of the first London listed RMB denominated money market ETF and last month saw Bank of China s first euro denominated bond which was admitted to trading in London. At the end of a busy H1, AIM celebrated its 20 th anniversary, marking a great achievement as the world s most successful and established market for growth companies. Underscoring our commitment to our open access model, we announced in early August an agreement with CME, a US exchange, to launch US futures contracts on FTSE Russell indexes. This follows a licensing agreement signed earlier this year with CBOE, to develop new index options in the US based on FTSE and Russell indexes In July, Turquoise entered exclusive discussions with Plato Partnership, a group representing asset managers and broker dealers, to collaborate on market structure initiatives in Europe. Further commentary on the major factors determining Group performance in this six month period is provided below. Operational Performance Revenue for Capital Markets, which includes primary and secondary market activities, increased 4% on an organic and constant currency basis (down 1% at a reported level). In primary markets, revenue was 1% lower, with growth in annual fee income offset by a slight decline in admission fees. There was continued good activity in terms of the number of main market new issues in the UK and Italy, while the amount of money raised, at 23.1 billion, was down on the high levels of last year (H1 2014: 28.1 billion). In secondary markets, revenue increased 6% on an underlying basis (flat at a reported level). UK cash equities trading revenue increased 8%, reflecting a 12% rise in value traded at London Stock Exchange and 23% growth on Turquoise. In Italy, revenue increased 10% at constant currency as the number of trades increased by 6%. Fixed income trading revenue increased 1% at organic constant currency (down 8% on a reported basis), reflecting 22% growth in trading volumes on the MTS repo markets, offset by a 6% decline in MTS cash markets and BondVision. Revenue from the Group s derivatives markets rose 4% on a constant currency basis (down 6% on a reported basis), with growth in Italy derivatives offset by declines in the UK. Revenue for Post Trade Services in Italy, comprising CC&G and Monte Titoli, increased 3% at constant currency (down 8% at a reported level). Clearing revenues rose 8% at constant currency, with a 10% increase in clearing volumes. Settlement revenue rose 1% at constant currency (down 10% as reported), while custody revenues declined 1% at constant currency (down 11 per cent on reported basis) as assets under custody reduced by 2% to 3.32 trillion. Treasury income decreased 11% on a constant currency basis to 13.4 million, as a consequence of the low yield environment in Eurozone government bonds and the short duration of cash margin investments. Post Trade Services - LCH.Clearnet segment comprises the Group's majority-owned global clearing business. Revenue for the half year declined 11% on a constant currency basis and down 14% on a reported basis, reflecting the loss of LME commodities clearing from September Adjusting for LME, revenue was flat on a reported basis and up 5% on a constant currency basis. OTC revenue rose 15% on a constant currency basis, with interest rate swap (IRS) revenues up 19%. Although the amount of IRS notional cleared decreased 25%, as a result of a reduction in market-wide activity during the period, revenue rose due to an increase in membership fee income as well as a greater volume of client clearing. Share of client clearing has remained good at 69% during the period. Use of compression tools remained strong; in the first six months of 2015, SwapClear has cleared $261 trillion and compressed $164 trillion through proprietary and third party compression services. 2 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

5 Non-OTC products clearing revenues declined 31% on a constant currency basis and were 8% lower on a reported basis and 2% lower on a constant currency basis after adjusting for loss of LME. Fixed income clearing revenue was flat year on year at constant currency, reflecting an unchanged level of clearing activity. Derivative revenue declined, reflecting a reduction in clearing volumes, while equity clearing revenues increased following 22% growth in clearing activity. Net treasury income was down 6% at constant currency, with pressures on investment returns mostly offset by an increase in average cash collateral, up 25% to 56.2 billion. Information Services revenue increased 45% to million (up 5% on an organic constant currency basis). This growth reflects both the good performance of FTSE, with revenue up 12% (8% at constant currency) to million, as well as contribution from Russell Indexes of 70.0 million. In addition, other information services, including UnaVista, continued to grow well with a 6% increase in revenue. Partly offsetting this strong performance was a 6% decline in revenue from real time data, reflecting a reduction in the number of professional users of real time UK and Italian data. The integration of FTSE and Russell Indexes is progressing well. The two businesses are now unified under a new global brand, FTSE Russell, and the client sales and marketing teams are combined. Further integration plans are well developed and roll out of the next stages will continue in the months ahead. In the meantime, both Index businesses are performing well: ETF AUM benchmarked to FTSE grew 8% to $230 billion and Russell ETF AUM increased 16% to $159 billion. Technology Services revenue increased 17% to 38.3 million (up 14% at constant currency). MillenniumIT revenue was 18% higher (up 8% at constant currency), mainly due to normal variations in phasing of billable work. Revenue from other technology services increased 15%, with growth from a number of IT products. Russell Investment Management performed well with income of million, the first six month contribution since completion of the acquisition in December The Group concluded its comprehensive review of the Investment Management business in February 2015 and decided to sell this business in its entirety. As a consequence, this segment of the Group is now treated as a discontinuing business in the principal financial statements and notes to the accounts in this interim report, but the results are included in this summary financial section. 3 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

6 Financial Summary Unless otherwise stated, all figures below refer to the six months ended 30 June Comparative figures are for the six months ended 30 June 2014 (H1 2014). Variance is also provided at organic and constant currency. Adjustments have been made to include discontinuing operations in the tables and narratives below. The basis of preparation is set out at the end of this report. Organic and constant 30 June currency Variance variance 1 m m % % Revenue Capital Markets (1%) 4% Post Trade Services - CC&G and Monte Titoli (8%) 3% Post Trade Services - LCH.Clearnet (14%) (11%) Information Services % 5% Technology Services % 14% Russell Investment Management Other revenue (11%) (8%) Total revenue 1, % 1% Net treasury income through CCP business: CC&G (20%) (11%) LCH.Clearnet (8%) (6%) Other income (6%) 0% Total income 1, % 0% Operating expenses (842.5) (372.4) 126% 4% Share of loss after tax of associates (0.1) - - Adjusted operating profit % (5%) Amortisation of purchased intangibles and nonrecurring items (126.7) (83.1) 52% (25%) Operating profit % 4% Basic earnings per share (p) % Adjusted basic earnings per share (p) % Dividend per share (p) % 1 Organic growth is calculated in respect of businesses owned for at least 6 months in either period and so excludes Bonds.com, MTS Indices and Frank Russell Company. The Group s principal foreign exchange exposure arises from translating our European based euro and US based USD reporting businesses into sterling. 2 before amortisation and impairment of purchased intangibles and goodwill and non-recurring items 3 change on an equivalent basis to dividend paid for 6 months period ending 30 September 2014 Unless otherwise stated, all figures refer to the 6 months ended 30 June 2015 and comparisons are against the same corresponding period in the previous year 4 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

7 The Group has delivered good financial results. Revenue increased 90% to 1,164.9 million (H1 2014: million), which includes the effects of the acquisition of Frank Russell Company. On a continuing operations basis, revenue increased 9% and rose 14% after adjusting for the loss of LME clearing business at LCH.Clearnet. On an organic and constant currency basis, revenue increased 1% with growth across most business segments, partly offset by the expected reduction at LCH.Clearnet following the loss of LME clearing revenues. Total income rose 83% to 1,207.8 million (H1 2014: million), and flat on an organic and constant currency basis. Operating expenses, before amortisation of purchased intangibles and non-recurring items, rose 126% to million (H1 2014: million), mostly reflecting inclusion of Russell. On an organic and constant currency basis, costs were 4% higher, mainly reflecting increased cost of sales following growth at FTSE Russell and SwapClear, and as investment in growth initiatives continues in the period. Offsetting these expenses were 30 million savings at LCH.Clearnet from the planned 60 million cost reduction programme, plus control of other expenditure. Adjusted operating profit for the period, before amortisation of purchased intangibles and nonrecurring items, increased 27% to million (H1 2014: million). Operating profit was million (H1 2014: million) Net finance costs were 34.2 million (down from 35.4 million in H1 last year), and profit before tax was million (H1 2014: million). The underlying effective Group tax rate was 26.0%, an increase from the rate for the year ended 31 December 2014 (25.6%), reflecting inclusion of the Russell Indexes and Investment Management operations, which are predominantly subject to minimum combined US federal and state tax rates of 35%. Adjusted basic EPS, before amortisation of purchased intangibles and non-recurring items, increased 14% to 65.5 pence (H1 2014: 57.3 pence) while basic EPS was 43.4 pence (H1 2014: 40.5 pence). Net cash inflow from operating activities was million (H1 2014: million), reflecting increased tax payments and working capital outflows. Capital expenditure in the period amounted to 48.6 million (H1 2014: 53.6 million). Looking ahead, we expect full year run rate capex to continue at similar levels to H1, as we continue to invest in further integration work and product initiatives. Net cash generated after capex, other investments and dividends, was 52.2 million (H1 2014: million). Free cash flow per share (post net interest paid, tax paid and investment activities) was 38.8 pence (30 June 2014: 45.3 pence). Committed, undrawn credit lines available for Group purposes at 30 June 2015 totalled million, extending out to 2016 or beyond. At 30 June 2015, adjusted net debt was 1,454.1 million (after setting aside 922 million of cash for regulatory and operational support purposes and assuming no surplus cash at LCH.Clearnet) while drawn borrowings of 1,762.0 million were 35.6 million higher than at the start of the current financial year. At 30 June 2015, pro forma net debt:ebitda reduced to 2.0 times (from 2.1 times at 31 December 2014). The Group had net assets of 2,903.4 million at 30 June 2015 (31 December 2014: 2,955.3 million), including 1,164.8 million in cash and cash equivalents including assets held for sale. Russell Investment Management The Group completed the acquisition of Frank Russell Company on 3 December 2014 and carried out a comprehensive review focused principally on assessing the strategic fit of Russell Investment Management with the Group s long term strategy. After careful consideration, the Group concluded its review on 5 February 2015 and decided to sell the business in its entirety. 5 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

8 The Group received a number of expressions of interest in a potential acquisition of the Investment Management business, and we continue to make good progress with the sale process. More information will be provided in due course. Work continues to ensure the full separation of the Russell Indexes business from the Investment Management operations, and this work is expected to be completed by the conclusion of the sale process. In the meantime, Russell Investment Management will continue its focus on client service, growth and innovation. Interim Dividend The Board continues to review ways to maximise shareholder value and maintain an efficient capital structure, and remains committed to a policy of progressive dividends to enhance shareholder returns. Accordingly, the Directors have declared an interim dividend of 10.8 pence per share, an increase of 11.4% (9.7 pence per share for the six months ended 30 September 2014). The interim dividend will be paid on 22 September 2015 to shareholders on the register on 28 August The Board intends to provide an update on capital allocation, including its longer term dividend policy, at the time of the Preliminary results for 2015, expected to be in March Board changes There have been a number of changes to the Board since the start of the year. Chris Gibson- Smith stood down as Chairman and left the Board with effect from 1 July 2015, after 12 years in the role. Robert Webb, Senior Independent Director and Chairman of the Remuneration Committee, retired from the Board following 14 years service, and Baroness Joanna Shields also stepped down to take on a UK Government role. Joining the Board are Donald Brydon, who becomes Chairman, and Mary Schapiro, who is a non- Executive Director. Paul Heiden has become the Senior Independent Director and Sherry Coutu has taken on the role as Chairman of the Remuneration Committee. The Board is grateful to all the departing directors for their contributions and in particular to Chris Gibson-Smith and Robert Webb for their significant insight, counsel and guidance over a period of significant development and achievement for the Group. Outlook The Group has made a good start to the financial year. We remain focused on achieving the cost synergies and revenue benefits from the integration of FTSE and Russell. We will also continue to invest in a wide range of growth initiatives across the Group, including the opportunities highlighted in Post Trade operations, as well as the cost reduction programme at LCH.Clearnet. Looking ahead, we remain well positioned as a leading international, open access market infrastructure business. Xavier Rolet Chief Executive 5 August LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

9 OPERATING PERFORMANCE KEY STATISTICS To assist investors in understanding the underlying performance of the Group, percentage changes are also presented on a constant currency basis. CAPITAL MARKETS Capital Markets comprises the Group s primary markets activities, providing access to capital for corporates and others, and the secondary market trading of cash equities, derivatives and fixed income. Organic and constant 30 June currency Variance variance 1 Revenue m m % % Primary Markets Annual fees % 8% Admission fees (6%) (5%) (1%) 1% Secondary Markets Cash equities UK & Turquoise % 8% Cash equities Italy (1%) 10% Derivatives (6%) 4% Fixed income (8%) 1% % 6% Other (16%) (13%) Total revenue (1%) 4% 1 Removal of Bonds.com revenue (Capital Markets Fixed Income) and MTS Indices removed from Capital Markets Fixed Income revenue and included in Information Services FTSE revenue 7 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

10 Capital Markets - Primary Markets 30 June Variance % New Issues UK Main Market, PSM & SFM (2%) UK AIM (50%) Borsa Italiana % Total (25%) Money Raised ( bn) UK New (48%) UK Further % Borsa Italiana New and Further (47%) Total ( bn) (18%) Capital Markets - Secondary Markets 30 June Variance Equity % Totals for period UK value traded ( bn) % Borsa Italiana (no of trades m) % Turquoise value traded ( bn) % SETS Yield (basis points) (3%) Average daily UK value traded ( bn) % Borsa Italiana (no of trades '000) % Turquoise value traded ( bn) % Derivatives (contracts m) LSE Derivatives (71%) IDEM % Total (11%) Fixed Income MTS cash and BondVision ( bn) 2,135 2,261 (6%) MTS money markets ( bn term adjusted) 44,856 36,669 22% 8 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

11 Post Trade Services CC&G and Monte Titoli This division comprises the Group s Italian-based clearing, settlement and custody businesses. Constant 30 June currency Variance variance m m % % Revenue Clearing (4%) 8% Settlement (10%) 1% Custody & other (11%) (1%) Total revenue (8%) 3% Net treasury income (20%) (11%) Total income (11%) (0%) CC&G Clearing 30 June Variance % Contracts (m) % Initial margin held (average bn) % Monte Titoli Settlement instructions (trades m) % Custody assets under management (average tn) (2%) 9 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

12 Post Trade Services - LCH.Clearnet Organic and constant 30 June currency Variance variance 1 Revenue m m % % OTC SwapClear % 19% ForexClear / CDSClear (12%) (1%) % 15% Non-OTC Fixed income (9%) (0%) Commodities Listed derivatives (14%) (11%) Cash equities % 8% (34%) (31%) Total Clearing fee revenue (14%) (11%) Other (14%) (9%) Total revenue (14%) (11%) Net treasury income (8%) (6%) Unrealised gain Total income (13%) (10%) 30 June Variance % OTC derivatives SwapClear IRS notional cleared ($trn) (25%) SwapClear members % CDSClear Notional cleared ( bn) % CDSClear members % ForexClear Notional value cleared ($bn) % ForexClear members % Non-OTC Fixed income - Nominal value ( trn) (0%) Listed derivatives (contracts m) (21%) Cash equities trades (m) % Average cash collateral ( bn) % 10 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

13 INFORMATION SERVICES The Information Services division consists of Global Indices products, real time data products and a number of other discrete businesses including Trade Processing operations, Desktop and Work Flow products. Organic and constant 30 June currency Variance variance 1 m m % % Revenue FTSE % 8% Russell Indexes Real time data (6%) (3%) Other information services % 8% % 5% 1 MTS Indices removed from Capital Markets Fixed Income revenue and included in Information Services FTSE revenue Other information services includes a small operation which is held for sale As at 30 June Variance % Terminals UK 75,000 79,000 (5%) Borsa Italiana Professional Terminals 128, ,000 (3%) ETFs assets under management benchmarked ($bn) FTSE % Russell Indexes % Russell Investment Management AuM ($bn) (5%) Technology Services Technology Services comprises technology connections and data centre services for clients of London Stock Exchange and Borsa Italiana, plus the MillenniumIT software business, based in Sri Lanka, which provides technology for the Group as well as third party sales and enterprise services. Organic and constant 30 June currency Variance variance m m % % Revenue MillenniumIT % 8% Technology % 20% Total revenue % 14% 11 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

14 Basis of Preparation Results for the European and US businesses have been translated into Sterling using the exchange rates set out below. Constant currency growth rates have been calculated by translating prior period results at the average exchange rate for the current period. Average rate Average rate 6 months ended Closing rate at 30 6 months ended 30 June 2015 June June 2014 Closing rate at 30 June 2014 GBP : EUR GBP : USD LSEG and the members of its group accept no responsibility for or liability in respect of information relating to Russell AUM, which has been published by Russell Investments and has not been independently verified by LSEG. No representation or warranty, expressed or implied, is given by or on behalf of LSEG or its group as to its accuracy or completeness and no reliance should be placed on such information 12 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

15 CONDENSED CONSOLIDATED INCOME STATEMENT Continuing operations 30 June 30 September 30 June Unaudited Unaudited Unaudited and not reviewed Notes m m m Restated Revenue Net treasury income through CCP business Other income Total income Expenses Operating expenses before amortisation of purchased intangible assets and non-recurring items 4 (400.2) (353.4) (369.2) Operating profit before amortisation of purchased intangible assets and non-recurring items Amortisation of purchased intangible assets 5 (76.9) (58.1) (58.8) Non-recurring items 5 (18.3) (56.1) (24.3) Operating profit Finance income Finance expense (34.6) (38.4) (40.4) Net finance expense 6 (34.3) (35.5) (35.3) Profit before tax from continuing operations Taxation on profit before amortisation of purchased intangible assets and non-recurring items (79.2) (65.7) (61.7) Taxation on amortisation of purchased intangible assets and nonrecurring items Total taxation 7 (45.4) (45.0) (34.2) Profit for the financial period from continuing operations Discontinued operations Profit after tax for the period from discontinued operations Profit for the financial period Profit attributable to: Equity holders Profit for the period from continuing operations Profit for the period from discontinued operations Non-controlling interests Profit attributable to non-controlling interests from continuing operations Profit attributable to non-controlling interests from discontinued operations 8 (0.5) LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

16 Earnings per share attributable to equity holders: Basic earnings per share p 26.6p 40.5p Diluted earnings per share p 26.2p 39.8p Adjusted basic earnings per share p 58.7p 57.3p Adjusted diluted earnings per share p 57.7p 56.4p Earnings per share for continuing operations attributable to equity holders: Basic earnings per share p 26.1p 40.1p Diluted earnings per share p 25.7p 39.4p Adjusted basic earnings per share p 58.2p 56.9p Adjusted diluted earnings per share p 57.2p 56.0p Dividend per share in respect of the financial period: Dividend per share paid during the period p 20.7p 10.1p Dividend per share declared for the period p 9.7p N/A The notes on pages 19 to 45 form an integral part of these interim condensed consolidated financial statements. 14 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

17 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 30 June 30 September 30 June Unaudited Unaudited Unaudited and not reviewed m m m Profit for the financial period Other comprehensive (loss) / income: Items that will not be subsequently reclassified to profit or loss Defined benefit pension scheme remeasurement loss (0.6) (8.7) (4.7) Items that may be subsequently reclassified to profit or loss Cash flow hedge (3.2) Net investment hedge Change in value of available for sale financial assets Exchange loss on translation of foreign operations (191.9) (120.8) (61.0) Tax related to items not recognised in income statement 5.5 (7.3) 2.8 (149.2) (63.5) (54.9) Other comprehensive loss, net of tax (149.8) (72.2) (59.6) Total comprehensive income for the financial period Attributable to non-controlling interests (34.5) (6.3) (13.3) Attributable to equity holders Total comprehensive income for the financial period The notes on pages 19 to 45 form an integral part of these interim condensed consolidated financial statements. 15 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

18 CONDENSED CONSOLIDATED BALANCE SHEET 30 June 30 September 31 December Unaudited Unaudited Notes m m m Assets Non-current assets Property, plant and equipment Intangible assets 11 3, , ,492.0 Investment in associates Deferred tax assets Derivative financial instruments Available for sale investments Retirement benefit assets Other non-current assets , , ,804.5 Current assets Inventories Trade and other receivables Derivative financial instruments CCP financial assets 419, , ,952.8 CCP cash and cash equivalents (restricted) 27, , ,493.0 CCP clearing business assets , , ,445.8 Current tax Assets held at fair value Cash and cash equivalents , , , , ,187.8 Assets held for sale 8 1, Total assets 453, , ,997.6 Liabilities Current liabilities Trade and other payables Derivative financial instruments CCP clearing business liabilities , , ,467.5 Current tax Borrowings Provisions , , ,037.3 Liabilities directly associated with assets held for sale , , ,037.3 Non-current liabilities Borrowings Other non-current payables Deferred income Deferred tax liabilities Retirement benefit obligations Other non-current liabilities Provisions , , ,005.0 Total liabilities 450, , ,042.3 Net assets 2, , ,955.3 Equity Capital and reserves attributable to the Company's equity holders Ordinary share capital Share premium Retained earnings / (losses) (38.9) 20.0 Other reserves 1, , ,524.9 Total shareholders' funds 2, , ,526.5 Non-controlling interests Total equity 2, , ,955.3 The notes on pages 19 to 45 form an integral part of these interim condensed consolidated financial statements. 16 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

19 CONDENSED CONSOLIDATED CASH FLOW STATEMENT Cash flow from operating activities 30 June 30 September 30 June Unaudited Unaudited Unaudited and not reviewed Notes m m m Cash generated from operations Interest received Interest paid (39.1) (40.6) (44.8) Corporation tax paid (95.3) (42.4) (74.7) Withholding tax paid - (1.9) - Net cash inflow from operating activities Cash flow from investing activities Purchase of property, plant and equipment (17.1) (11.0) (15.8) Sale of property, plant and equipment Purchase of intangible assets (31.5) (29.2) (37.8) Investment in other acquisition (0.9) - - Investment in subsidiaries (2.1) (10.0) (10.0) Contributions into investment funds Dividends received from associates Net cash inflow from acquisitions Net cash outflow from investing activities (31.9) (49.0) (62.4) Cash flow from financing activities Capital raise Dividends paid to shareholders 10 (78.0) (56.2) (27.3) Dividends paid to non-controlling interests (4.3) (1.1) (1.3) Financing cash flow hedge gain Proceeds from own shares on exercise of employee share options Purchase of own shares by ESOP Trust - - (0.1) Repayments of finance lease (2.5) - - Repayments of borrowings (0.1) (266.9) (45.8) Proceeds from borrowings Net cash (outflow) / inflow from financing activities (24.3) (73.1) Increase in cash and cash equivalents Cash and cash equivalents at beginning of period 1, Exchange loss on cash and cash equivalents (72.6) (50.2) (33.8) Cash and cash equivalents at end of period 1, , Cash and cash equivalents at end of period from continuing operations , Cash and cash equivalents at end of period from discontinued operations Cash and cash equivalents at end of period 1, , The notes on pages 19 to 45 form an integral part of these interim condensed consolidated financial statements. 17 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

20 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to equity holders Ordinary share capital Share premium Retained earnings / (losses) Other reserves Total attributable to equity holders Non- controll- -ing interests Total equity m m m m m m m 31 December 2013 (Unaudited) (81.3) 1, , ,961.1 Profit for the period Other comprehensive income / (loss) for the financial period (47.2) (46.3) (13.3) (59.6) Interim dividend relating to the year ended 31 March (27.3) - (27.3) - (27.3) Employee share scheme expenses Dividend payments to non-controlling interests (1.4) (1.4) 30 June 2014 (Unaudited and restated) , , ,014.0 Profit for the period Other comprehensive loss for the financial period - - (6.6) (20.3) (26.9) (13.8) (40.7) Issue of shares Rights issue Final dividend relating to the year ended 31 March (56.2) - (56.2) - (56.2) Employee share scheme expenses Dividend payments to non-controlling interests (4.9) (4.9) Purchase of non-controlling interest within acquired subsidiary December , , ,955.3 Profit for the period Other comprehensive income / (loss) for the financial period (121.2) (115.3) (34.5) (149.8) Issue of shares Interim dividend relating to the period ended 31 December (33.6) - (33.6) - (33.6) Final dividend relating to the period ended 31 December (44.4) - (44.4) - (44.4) Employee share scheme expenses Dividend payments to non-controlling interests (4.2) (4.2) Purchase of non-controlling interest June 2015 (Unaudited) , , ,903.4 The other reserves are set out on page 121 of the Group s Annual Report for the nine month period ended 31 December The movement in the current period comprises a charge of 157.4m to the foreign exchange reserves and a credit of 36.2m to the hedging reserve, both of which are distributable reserves. The Board approved the allotment and issue of 394,954 ordinary shares of par value 6 79/86 p at 565p each in the Company to satisfy options granted under the Company s Save-As-You-Earn and International Sharesave Plans. During the period, the Group also issued 1,000,000 ordinary shares at par value to the Employee Benefit Trust in relation to the Group s employee share option scheme. The notes on pages 19 to 45 form an integral part of these interim condensed consolidated financial statements. 18 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

21 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The Interim Report for the London Stock Exchange Group plc (the Group or the Company ) for the six months ended 30 June 2015 was approved by the Directors on 5 August Basis of preparation and accounting policies The interim condensed consolidated financial statements of London Stock Exchange Group plc and its subsidiaries (collectively, the Group ) for the six months ended 30 June 2015 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with International Accounting Standard 34 (IAS 34), 'Interim Financial Reporting'. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group s annual consolidated financial statements for the nine month period ended 31 December The accounting policies adopted in the preparation of these interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group s annual consolidated financial statements for the nine month period ended 31 December 2014, with the addition of the policy in relation to discontinued operations. A disposal group qualifies as discontinued operation if it is a component of an entity that either has been disposed of, or is classified as held for sale and: represents a separate major line of business or geographical area of operations; is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or is a subsidiary acquired exclusively with a view to resale. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit or loss. Additional disclosures are provided in Note 8. All other notes to the financial statements include amounts for continuing operations, unless otherwise stated. There are no further standards, interpretations and amendments effective as of 1 January 2015 relevant to the Group or that impact the Group s annual consolidated financial statements and interim condensed consolidated financial statements. The Group has changed its financial year end to 31 December. As a consequence, the interim condensed consolidated financial statements are presented as of 30 June 2015 with comparative statement of income statement, statement of comprehensive income, cash flow statement and statement of changes in equity for the comparable interim 30 June However, to help readers of the financial statements, the previously published six month 30 September 2014 interim numbers are presented as well. The following standards and interpretations were issued by the International Accounting Standards Board (IASB) and International Financial Reporting Standards Interpretations Committee (IFRIC) since the last Annual Report, but have not been adopted either because they were not endorsed by the European Union (EU) at 30 June 2015 or they are not yet mandatory and the Group has not chosen to early adopt. The impact on the Group s financial statements of the future standards, amendments and interpretations is still under review, but the Group does not expect any of these changes to have a material impact on the results or the net assets of the Group: International accounting standards and interpretations Effective date Amendments to IFRS 11, 'Joint arrangements' on accounting for acquisitions of interest in 1 January 2016 a joint operation Amendment to IAS 16,'Property,plant and equipment and IAS 38,'Intangible assets', 1 January 2016 on Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to IAS 27, 'Separate financial statements' on equity method in separate 1 January 2016 financial statements Amendments to IFRS 10, Consolidated financial statements and IAS 28, 'Associates and 1 January 2016 joint ventures on sale and contribution of assets between an investor and its associate or joint venture Annual Improvements January 2016 IFRS 14, Regulatory deferral accounts 1 January 2016 Amendments to IAS 1, Presentation of financial statements relating to disclosure initiative 1 January 2016 IFRS 15 Revenue from contracts with customers' 1 January 2017 IFRS 9 Financial instruments on classification and measurement and amendments regarding general hedge accounting 1 January 2018 The preparation of the interim condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported income and expense, assets and liabilities and disclosure of contingencies at the date of the interim condensed consolidated financial statements. Although these estimates and assumptions are based on management's best judgement at the date of the interim condensed consolidated financial statements, actual results may differ from these estimates. 19 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

22 For these interim condensed consolidated interim financial statements, the Group is not adopting the columnar format for its consolidated income statement as stated in the Group basis of preparation and accounting policies in the Group s annual consolidated financial statements for the nine month period ended 31 December The statutory financial statements of London Stock Exchange Group plc for the nine month period ended 31 December 2014, which carried an unqualified audit report, have been delivered to the Registrar of Companies and did not contain a statement under section 498 of the Companies Act The interim condensed consolidated financial statements is unaudited but has been reviewed by the auditors and their review opinion in included in this report. The interim condensed consolidated financial statements does not constitute statutory financial statements within the meaning of section 434 of the Companies Act Prior period adjustment On business combinations, the Group recognises a deferred tax liability against the intangible assets acquired. The deferred tax liability is recognised in respect of the amortisation of the acquired intangibles which have no or partial tax base for the Group. The deferred tax is recognised and released to the income statement over the same period as the amortisation of the acquired intangible assets. The recognition of the deferred tax is an accounting treatment to ensure that the effective tax rate is maintained for the Group and is not impacted by amortisation costs which are not tax deductible. There were no cash or working capital impacts of these movements or to the balance sheet of the parent company. It was identified for the interim condensed consolidated financial statements for the six months to 30 September 2014 that the deferred tax recognised was insufficient. As a consequence, the release of the liability to the income statement, which results in a reduction in the Group s income statement tax charge, was understated. The correction of these entries result in an increase in deferred tax liability, goodwill and a resulting credit to the income statement as the deferred tax liability is unwound over the useful economic lives of the associated purchased intangibles. In addition in circumstances where the underlying assets have been recognised in a currency other than Sterling there is an adjustment in relation to the retranslation of these balances. The effect of these adjustments on the six months to 30 June 2014, which was presented as non-statutory financial information in the Interim Results for the three months ended 30 June 2014, is shown by restating each of the affected financial statement line items shown in this report as follows: 30 June 2014 Unaudited and not reviewed Effect on the income statement Profit for the financial period (as originally stated) Taxation charge reduction 11.0 Profit for the financial period (restated) m Effect on earnings per share 30 June 2014 Unaudited and not reviewed Basic earnings per share (as originally stated) 40.0p Prior period adjustment 0.5p Basic earnings per share (restated) 40.5p Diluted earnings per share (as originally stated) 39.3p Prior period adjustment 0.5p Diluted earnings per share (restated) 39.8p There was no effect on adjusted basic earnings per share or adjusted diluted earnings per share as the deferred tax adjustment is treated as an adjusting item to the operating profit. 20 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

23 3. Segmental information Segmental disclosures for the six months ended 30 June 2015 are as follows: Capital Markets Post Trade Services - CC&G and Monte Titoli Post Trade Services - LCH.Clear- -net Information Services Technology Services Other Eliminations Group Unaudited m m m m m m m m Revenue from external customers Inter-segmental revenue (5.2) - Revenue (5.2) Net treasury income through CCP business Other income Total income (5.2) Operating profit before amortisation of purchased intangible assets and nonrecurring items Amortisation of purchased intangible assets (76.9) Non-recurring items (18.3) Operating profit Net finance expense (34.3) Profit before tax from continuing operations Other income statement items Depreciation and software amortisation (5.2) (2.9) (13.5) (6.4) (2.8) (0.1) 1.7 (29.2) Net treasury income through CCP business of 40.4m comprises gross interest income of 112.8m less gross interest expense of 72.4m. Interest from investment in securities amounts to 4.2m. 21 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

24 Segmental disclosures for the six months ended 30 September 2014 are as follows: Capital Markets Post Trade Services - CC&G and Monte Titoli Post Trade Services - LCH.Clear- -net Information Services Technology Services Other Eliminations Group Unaudited m m m m m m m m Revenue from external customers Inter-segmental revenue (4.4) - Revenue (4.4) Net treasury income through CCP business Other income Total income (4.4) Operating profit before amortisation of purchased intangible assets and nonrecurring items Amortisation of purchased intangible assets (58.1) Non-recurring items (56.1) Operating profit Net finance expense (35.5) Profit before tax from continuing operations Other income statement items Depreciation and software amortisation (6.1) (2.7) (12.5) (5.1) (1.1) (0.1) 0.6 (27.0) Net treasury income through CCP business of 47.8m comprises gross interest income of 61.6m less gross interest expense of 13.8m. Interest from investment in securities amount to 17.2m. 22 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015

25 4. Expenses by nature Expenses comprise the following: 30 June 30 September Unaudited Unaudited m m Cost of sales Employee costs Depreciation and non-acquisition software amortisation IT costs Other costs Total expenses Amortisation of purchased intangible assets and non-recurring items 30 June 30 September Unaudited Unaudited m m Amortisation of purchased intangible assets Transaction costs Transaction credit - (2.4) Restructuring costs Integration costs Total affecting operating profit Charge for new transaction related revolving credit facility Total affecting profit before tax Tax effect on items affecting profit before tax Deferred tax on amortisation of purchased intangible assets (20.7) (16.0) Current tax on amortisation of purchased intangible assets (0.9) (1.1) Tax effect on other items affecting profit before tax (12.2) (3.6) Total tax effect on items affecting profit before tax (33.8) (20.7) Total charge to income statement Restructuring and integration costs in the current period principally relate to the ongoing restructuring and integration of Frank Russell Company. The restructuring and integration costs in the prior period were in relation to LCH.Clearnet Group. Transaction costs comprise charges incurred for ongoing services related to potential or completed acquisitions. The transaction credit relates to a reduction in obligations arising from the acquisition of LCH.Clearnet Group. 23 LONDON STOCK EXCHANGE GROUP INTERIM REPORT 2015